Professional Documents
Culture Documents
2
Financial
Information for
Management
PART 1
QUESTION PAPER
1 A cost is described as staying the same over a certain activity range and then increasing but remaining stable over a
revised activity range in the short term.
What type of cost is this?
A A fixed cost
B A variable cost
C A semi-variable cost
D A stepped fixed cost
2 The following quarterly adjustments have been calculated using the multiplicative model for time series analysis:
Quarter 1 Quarter 2 Quarter 3
0·95 1·25 0·70
What would be the adjustment for quarter 4 to two decimal places?
A 0·83
B 0·91
C 1·10
D 1·20
3 A company which uses marginal costing has a profit of £37,500 for a period. Opening stock was 100 units and
closing stock was 350 units.
The fixed production overhead absorption rate is £4 per unit.
What is the profit under absorption costing?
A £35,700
B £36,500
C £38,500
D £39,300
2
5 A company values stocks using the weighted average value after each purchase. The following receipts and issues
have been made with regards to materials for the last month:
What is the value of the closing stock using this weighted average method?
A £1,012·50
B £976·50
C £962·50
D £925·00
6 Sydney wishes to make an investment on a monthly basis starting next month for five years. The payments into the
fund would be made on the first day of each month.
The interest rate will be 0·5% per month. Sydney needs a terminal value of £7,000.
What should be the monthly payments into the fund to the nearest £?
A £75
B £86
C £100
D £117
3 [P.T.O.
8 The following could relate to optical mark readers:
(i) Specialist pens are always required for use.
(ii) Data entry is quick.
(iii) Computers carry out most of the work.
Which of the above would be considered to be advantages of using optical mark readers?
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii)
9 Which of the following would be best described as a short term tactical plan?
A Reviewing cost variances and investigate as appropriate
B Comparing actual market share to budget
C Lowering the selling price by 15%
D Monitoring actual sales to budget
4
12 A company uses process costing to establish the cost per unit of its output.
The following information was available for the last month:
Input units 10,000
Output units 9,850
Opening stock 300 units, 100% complete for materials and 70%
complete for conversion costs
Closing stock 450 units, 100% complete for materials and 30%
complete for conversion costs
The company uses the weighted average method of valuing stock.
What were the equivalent units for conversion costs?
A 9,505 units
B 9,715 units
C 9,775 units
D 9,985 units
5 [P.T.O.
14 The following graph has been established for a given set of constraints:
300
200
B C
100
A D
OF
The objective function (OF) for the company has also been plotted on the graph and the feasible region is bounded
by the area ABCD.
At which point on the graph will profits be maximised?
A
B
C
D
15 The following information has been obtained for sales of two products for a three year period:
Price Quantity
Product A Product B Product A Product B
2000 (base year) 100 150 3 4
2001 125 140 2 3
2002 130 135 2 4
What is the Paasche quantity index for 2002?
A 0·86
B 0·89
C 1·19
D 1·20
6
16 A company has just secured a new contract which requires 500 hours of labour.
There are 400 hours of spare labour capacity. The remaining hours could be worked as overtime at time and a half
or labour could be diverted from the production of product X. Product X currently earns a contribution of £4 in two
labour hours and direct labour is currently paid at a rate of £12 per normal hour.
What is the relevant cost of labour for the contract?
A £200
B £1,200
C £1,400
D £1,800
19 A company has the following budgeted information for the coming month:
Budgeted sales revenue £500,000
Budgeted contribution £200,000
Budgeted profit £ 50,000
What is the budgeted break-even sales revenue?
A £125,000
B £350,000
C £375,000
D £450,000
7 [P.T.O.
20 An investment has the following cash inflows and cash outflows:
What is the net present value of the investment at a discount rate of 8%?
A (£2,416)
B £7,046
C £6,981
D £2,351
22 A company has over absorbed fixed production overheads for the period by £6,000. The fixed production overhead
absorption rate was £8 per unit and is based on the normal level of activity of 5,000 units. Actual production was
4,500 units.
What was the actual fixed production overheads incurred for the period?
A £30,000
B £36,000
C £40,000
D £42,000
23 A company uses process costing to value its output. The following was recorded for the period:
Input materials 2,000 units at £4·50 per unit
Conversion costs £13,340
Normal loss 5% of input valued at £3 per unit
Actual loss 150 units
There were no opening or closing stocks.
What was the valuation of one unit of output to one decimal place?
A £11·8
B £11·6
C £11·2
D £11·0
8
24 Which of the following are correct with regard to regression analysis?
(i) In regression analysis the n stands for the number of pairs of data.
(ii) ∑ x2 is not the same calculation as (∑ x)2
(iii) ∑ xy is calculated by multiplying the total value of x and the total value of y
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii)
25 The following information relates to labour costs for the past month:
Budget Labour rate £10 per hour
Production time 15,000 hours
Time per unit 3 hours
Production units 5,000 units
Actual Wages paid £176,000
Production 5,500 units
Total hours worked 14,000 hours
There was no idle time.
What were the labour rate and efficiency variances?
Rate variance Efficiency variance
A £26,000 adverse £25,000 favourable
B £26,000 adverse £10,000 favourable
C £36,000 adverse 1£2,500 favourable
D £36,000 adverse £25,000 favourable
(50 marks)
9 [P.T.O.
Section B – ALL FIVE questions are compulsory and MUST be attempted
1 A business operates with two production centres and three service centres. Costs have been allocated and apportioned
to these centres as follows:
Information regarding how the service centres work for each other and for the production centres is given as:
10
2 Break-even charts and profit-volume charts are commonly associated with cost-volume-profit analysis (break-even
analysis).
Required:
(a) (i) Sketch a break-even chart and indicate where the break-even point would be for a single product firm.
Clearly label the axes and indicate the following lines:
– total revenue;
– variable cost;
– fixed costs; and
– total cost.
(ii) How would contribution be established from your chart in (a)(i)? (6 marks)
(b) (i) Sketch a profit-volume chart and indicate where the break-even point would be for a single product firm.
Clearly label the axes and indicate the profit line and fixed costs.
(ii) How would contribution be established from your chart in (b)(i)? (4 marks)
[Note: no specific numbers are required.]
(10 marks)
3 A company has obtained the following information regarding costs and revenue for the past financial year:
Original budget:
Sales 10,000 units
Production 12,000 units
Standard cost per unit:
£
Direct materials 5
Direct labour 9
Fixed production overheads 8
–––
22
–––
Selling price 30
Actual results:
Sales 9,750 units
Revenue £325,000
Production 11,000 units
Material cost £65,000
Labour cost £100,000
Fixed production overheads £95,000
There were no opening stocks.
Required:
(a) Produce a flexed budget statement showing the flexed budget and actual results. Calculate the variances
between the actual and flexed figures for the following:
– sales;
– materials;
– labour; and
– fixed production overhead. (7 marks)
(b) Explain briefly how the sales and materials variances calculated in (a) may have arisen. (3 marks)
(10 marks)
11 [P.T.O.
4 A business currently orders 1,000 units of product X at a time. It has decided that it may be better to use the Economic
Order Quantity method to establish an optimal reorder quantity.
Information regarding stocks is given below:
Purchase price £15/unit
Fixed cost per order £200
Holding cost 8% of the purchase price per annum
Annual demand 12,000 units
Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of
product X.
Required:
(a) Calculate the Economic Order Quantity. (2 marks)
(b) Using your answer to (a) above calculate the revised annual total stock costs for product X and so establish
the difference compared to the current ordering policy. (4 marks)
(c) List ways in which discounts might affect this Economic Order Quantity calculation and subsequent stock
costs. (4 marks)
(10 marks)
5 A company manufactures a single product, product Y. It has documented levels of demand at certain selling prices
for this product as follows:
Required:
Using a tabular approach calculate the marginal revenues and marginal costs for product Y at the different levels
of demand, and so determine the selling price at which the company profits are maximised.
(10 marks)
12
Formulae Sheet
13 [P.T.O.
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Annuity Table
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15